Samarco reaches settlement with Brazilian authorities over dam collapse

Brazilian iron ore pellet producer Samarco has reached a final agreement with Brazilian authorities and its shareholders - Vale and BHP - to settle legal action that resulted from a tailings dam disaster in 2015.

The agreement was signed by Samarco, Vale, BHP, and the Brazilian prosecution offices of the federal government and the states of Minas Gerais and Espírito Santo, as well as other government authorities, Vale said on Monday June 25.

The deal extinguishes a 20-billion-Reais ($5.29-billion) lawsuit filed by the Brazilian federal government and the state governments of Minas Gerais and Espírito Santo following the collapse of Samarco’s Fundão tailings dam at Germano mine.

The agreement also settles part of another legal action undertaken by state prosecutors in Minas Gerais seeking 155 billion Reais, the remaining part of which will remain suspended until eventual renegotiation or future expiry, Vale said.

The agreement establishes changes in the governance of the Renova Foundation, an entity responsible for the programs for remediation and compensation of the areas and communities affected by the dam failure, and envisages the possibility of renegotiating such programs.

The deal also provides for the appointment of experts selected by the federal prosecutors and paid by Samarco to evaluate and monitor the progress of the 42 programs established under a reparation deal signed in March 2016.

Finally, Samarco and its shareholders will provide the Brazilian court with 2.20 billion Reais in guarantees for the fulfillment of obligations regarding the reparation programs.

“The agreement represents an important step toward solving the challenges caused by the Fundão tailings dam accident, especially by increasing the participation of the affected people in the governing bodies of the Renova Foundation,” Vale said.

Samarco, a 50:50 joint venture between Vale and BHP, was forced to shut down its 30-million-tonnes-per-year pelletizing operations in November 2015 after the collapse of the Fundão tailings dam, which flooded nearby settlements and caused 19 fatalities.

The company does not expect to resume its operations before early 2019. It expects to resume production using only a fraction of its total output capacity once it attains all necessary licenses.

Metal Bulletin’s monthly direct-reduction-grade iron ore pellet premium index reached $63.50 per dry metric tonne on May 31, up from $63 per dry metric tonne a month earlier.

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